Video: On the assembly line

updated 3/13/2006 5:25:23 PM ET 2006-03-13T22:25:23

Foreign auto makers tightened their grip on the U.S. market Monday when Toyota Motors Corp. and Kia Motors Corp. unveiled plans to build up to 400,000 more vehicles in factories in Indiana and Georgia.

South Korea-based Kia said it would build a $1.2 billion factory in West Point, Ga., its first in the U.S., while Toyota announced it would begin building Camry sedans at a Subaru plant in Lafayette, Ind., shifting production from a factory in Japan.

“Toyota really believes that we need to manufacture vehicles, engines and other parts where we sell our vehicles,” said Gary Convis, president of Toyota’s Kentucky plant, which also produces the top-selling Camry. “This allows us to do that quicker.”

The expansions come as the nation’s domestic producers are struggling under the weight of falling U.S. market share and rising costs for health care and pensions.

Only 57 percent of the nation’s new vehicles are sold by American companies, according to research from the Brookings Institute. In 1970, General Motors Corp., Ford Motor Co. and DaimlerChrysler AG’s Chrysler Group sold 87 percent of new vehicles on the road.

Last year, the Big Three automakers’ sales were down 2 percent overall. No. 1 GM is struggling to stay out of bankruptcy, and Ford plans to cut 30,000 jobs and close 14 facilities by 2012.

Sales of Asian brands, meanwhile, climbed 7 percent.

“The competition seems to be heating up even more,” said Catherine Madden, an auto analyst at the consulting company Global Insight Inc.

Brisk sales at Toyota, the world’s second largest automaker, have put it on pace to surpass GM as the world’s biggest automaker in the next year or two.

The company reported a 34 percent rise in profit to about $3 billion, for the quarter ended Dec. 31 as sales jumped in North America and Asia.

That will grow with the Lafayette facility, a partnership with Toyota and Subaru’s parent company, Fuji Heavy Industries. Toyota will begin building the Camry in Lafayette next spring and plans to roll out 100,000 sedans each year.

By 2008, Toyota officials said their North American production will near 2 million vehicles, thanks to the second Indiana plant, a new facility in Texas and other expanded operations. The company also plans to begin making a Camry hybrid at its factory in Georgetown, Ky.

Kia expects to begin its Georgia operations in 2009. The plant will produce 300,000 vehicles a year at maximum capacity.

The company predicts its sales in the United States and Canada will increase by 15 percent to 350,000 vehicles in 2006, and grow to 800,000 by 2010. Kia sold 1.27 million vehicles worldwide in 2005, 13.9 percent more than the year before.

The Korean company said it has invested more than $300 million in the United States over the last four years.

“Kia Motors has entered an aggressive growth phase in the U.S.,” said Kia President and chief executive Euisun Chung.

Clifford Winston, a senior fellow at the Brookings Institute, said the foreign automakers are capitalizing on image problems among their American counterparts.

“The U.S. companies have improved the value and quality of their cars,” Winston said. “The problem is, the Japanese and even Europeans have just done it faster. There’s this increasing gap, and they just have trouble catching up.”

Tom Easterday, senior vice president at Subaru of Indiana Automotive, where the Camrys will be built, said the lines between domestic and import auto companies are blurring, as foreign automakers bulk up their U.S. work force, use parts made in the U.S. and sell their products at U.S. dealers.

“I think the distinction of what’s foreign and what’s domestic is certainly going away,” he said. “It certainly makes us as much of a domestic manufacturer as an other auto maker.”

But industry executives said despite the uptick in Asian auto manufacturing in the U.S., the domestic companies will likely emerge from their slump as robust competitors.

“I think GM and Ford will work through these issues together and they’ll come out of it more financially strengthened companies,” Toyota’s Convis said. “And I believe they’ll be strong competitors in the future.”

© 2012 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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